When Will State Pensions Systems Go Broke?

Joshua Rauh recently released a study that made bold predictions about when the asset pool of a state’s pension system would run dry.  Illinois topped the list with a “Year Run Out” estimate of 2018–just eight short years away.  Really?

Well, apparently so.  I recently came across this article in Bloomberg BusinessWeek that states:

Illinois’s Teachers Retirement System may sell $3 billion of investments to pay for benefits this year because the state can’t make its contributions to the fund, a spokesman said.

The pension plan sold $200 million of assets in July and $290 million in August, Dave Urbanek, spokesman for the $33 billion fund, said in a phone interview.

“We understand from the comptroller that there is no money to pay us,” said Urbanek. “If we don’t get a state contribution, we will have to sell more.”

The fund was forced to sell assets last year, too, as it awaited a state contribution. That payment came after Illinois issued $3.47 billion of taxable bonds to fund its pension contribution in January.

Wow, $3 billion is almost 10 percent of the value of the fund!  In eleven years, the asset pool will be completely gone with withdrawals of that size.  I guess Rauh is pretty much right–eight years, eleven years, close enough.  If I was a retired teacher in Illinois, I would be afraid . . . very afraid.  Then again, if I was a taxpayer in Illinois I would be even more afraid.

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